Sunday, September 30, 2012

Incomes don't trickle down- not in U.S., not in Wisconsin

Couple of reports in the last week shows yet again that the missing link in the economic recovery of the last 3 years has been a lack of wage growth for the average American. This is a topic I've touched on in the past, especially in showing how real wages are lower now than they were in 2000, and in pictures like these which illustrate how wages have been taken out of GDP, while profits have never been reaped and hoarded like never before.

To review, here's the wages stat.

And now the profits stat.

And corporate profits continue to go up. While the bigger news in last week's GDP report was the revising down of 2nd quarter GDP from 1.7% to 1.3%, page 15 of that report showed that profits are growing at a lot more than 1.3% a year.

After-tax profits, U.S.
Q2 2011- $783.9 million
Q2 2012- $925.3 million (+18.0%)

Where's your cut of this 18% increase? Unless you're an oligarch or have enough money left around to play in the stock market, the answer is "not much."

This flatlining of wages in light of huge profits has coincided with the Bush tax cuts, which lowered marginal tax rates on the wealthy, and later lowered capital gains and dividend taxes even more. And it's not really surprising because lower tax rates on the rich and corporate make profit-hoarding and gambling on stocks and real estate more worthwhile than paying employees and, you know, MAKING ACTUAL STUFF.

And while we finally saw some increases in incomes for the first half of 2012, the stats from Friday's personal income report showed some slippage in August. Real disposable incomes were up 1.43% in the 6 months between January and July, but was down by 0.33% in August. This also leveled off the year-over-year increase in real disposable income, keeping it at 1.8% over the last 12 months.

Some of that had to do with higher gas prices raising inflation (the current-dollar increase in disposable income was basically the same as the one in July -a sucky 0.1%). The higher gas prices sucked up most of the increase in consumption as well, as it real consumption expenditures went up less than 0.1% in August compared to the strong 0.4% increase in July, and year-over-year barely nudged up, to 2.0%.

This failure of trickle-down also shows itself in state incomes. The BEA released their quarterly survey of state incomes last week, and it showed Wisconsin continuing to trail much of the rest of the nation in income growth.

Wisconsin was 38th in the country for income growth in the 2nd Quarter of 2012 at 0.9%, below the U.S. average of 1.0%. It was the 4th time in the 5 quarters since Act 10 was passed that Wisconsin's income growth trailed the nation's income growth, and since the Walker/WisGOP budget was passed, the state has also lagged most of its Midwestern neighbors.

Income growth, Q2 2011-Q2 2012
Ind. +4.22%
Mich +4.09%
Ohio +3.62%
Minn +3.56%
Iowa +3.52%
WIS. +2.69%
Ill. +2.52%

So here's another example of how the supply-side experiment of cutting corporate taxes and cutting public sector workers' take-home pay is failing. We are not growing incomes and we're certainly not growing jobs. All these Walker/WisGOP policies have done is mirror the giveaways at the federal level that have thrown money upwards to the rich and corporate while leaving the average worker no better off than they were before, despite being more productive than ever.

With that in mind, it is yet another piece of evidence that trickle-down economics doesn't work in improving and economy or wages, and needs to end as soon as possible. The Democrats succeeded in putting the spotlight on this failure at the DNC earlier this month, and if they continue to pound this point in the next 5 weeks, there's no amount of Republican cheating that'll allow the GOPs to win in November. Real people know that trickle-down isn't water.

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